2022 was a tough financial year, but experts predict that 2023 will be even worse

The managing director of the International Monetary Fund announced yesterday that a third of the world would fall into recession in 2023. Analysts expect the new year to begin with a renewed focus on central banks and inflation. Traders will be vigilant for any signs of an impending recession, he said.

 2022 was a tough fiscal year for the US and Canada. As interest rates rose, inflation rose sharply, and the economy slowed. But analysts say 2023 will be even tougher as a recession looms, unemployment is expected to rise while prices remain high, and interest rates reduce purchasing power. Experts predict that inflation will continue to dominate the economic events of 2023. Many economists believe that the US and Canada have already entered a moderate recession that will last most of 2023.

Joachim Nagel of the European Central Bank’s Governing Council said that additional measures are needed to curb rising expectations about future prices and return inflation to the 2% target. The ECB is expected to go against the trend of most other major central banks early this year and continue its aggressive pace of rate hikes, even as inflation pressures across Europe are forecast to ease this week. ECB President Christine Lagarde said eurozone wages are rising faster than previously estimated, and the Central Bank must not let that exacerbate already high inflation. On Monday, German government bond yields fell from their highest levels in more than a decade amid more aggressive signals from the ECB.

Germany’s finance minister expects inflation in Europe’s largest economy to fall to 7% this year and continue to decline in 2023 but believes high energy prices will become the new normal. Influenced by a surge in energy prices following Russia’s invasion of Ukraine and a decline in energy exports from Russia, annualized inflation in Germany slowed slightly in November to 11.3% from a high of 11.6% a month earlier.

The UK Treasury said it plans to cut funding to businesses to help them cope with rising energy bills as it seeks to clean up public finances. Under the current business support program, companies receive savings of up to £345 per megawatt hour of electricity and £91 per megawatt hour of gas. The current business protection program is very expensive for Britain. The existing program expires at the end of March and will be revised downward, which will hit business costs.

Rising interest rates are weighing on precious metals. But gold prices have approached a six-month-high amid a growing likelihood that the Federal Reserve will slow the pace of rate hikes even further. Although the yellow metal closed 2022 slightly lower, it is expected to benefit from a slower pace of rate hikes this year, as recent data suggest that US inflation is likely to have peaked.

The oil market was closed yesterday. In 2023 analysts expect prices to rise slightly as the economic backdrop worsens and the COVID-19 outbreaks in China threaten demand and offset the impact of supply shortages caused by sanctions against Russia. For 2022, WTI crude rose by 4.57%, and Brent oil increased by 8.12%.

Japan’s Nikkei 225 (JP225) fell by 10.95%, China FTSE China A50 (CHA50) decreased by 16.72%, Hong Kong Hang Seng (HK50) lost 15.01%, India NIFTY 50 (IND50) added 3.24%, Australia S&P/ASX 200 (AU200) closed in minus 7.26% at the end of 2022.

In the commodities market, orange juice futures (+46.98%), natural gas (+24.40%), soybeans (+14.34%), corn (+13.84%), and platinum (+12.59%) showed the biggest gains in 2022. Lumber futures (-66.4%), cotton (-27.06%), coffee (-26.98%), and copper (-13.03%) showed the biggest declines for 2022.